13/05/20

EUROPE: Commission delays tax avoidance measures.

The European Commission is proposing to delay deadlines for implementing the exchange of information under the Directive on Administrative Cooperation (DAC6), which was due to come into force in July, because of the current pandemic.

The legislation has already been adopted in the UK and requires taxpayers and their advisers to disclose details of certain cross-border arrangements to HMRC as part of moves to crack down on the use of aggressive tax avoidance across EU member states.

The changes mean members states will have three additional months to exchange information on financial accounts of which the beneficiaries are tax residents in another member state. Similarly, member states will have three additional months to exchange information on certain cross-border tax planning arrangements.

Depending on the evolution of the coronavirus pandemic, the Commission says it may extend the deferral period once more, for a maximum of three further months. The proposed tax measures only affect the deadlines for reporting obligations.

The beginning of application of DAC 6 will remain 1 July 2020 and the reportable arrangements made during the postponement period will have to be reported by the time the deferral has terminated.

Equally, the information on financial accounts to be exchanged under DAC 2 during that period will have to be reported by the time the deferral has ended.

All key reporting dates are to be deferred by three months and any arrangements made during the postponement period will have to reported by the end of the deferral period.

this means changing the date for the beginning of the 30-day period for reporting cross-border arrangements from 1 July 2020 to 1 October 2020.

It also changes the date for the reporting of cross-border arrangements that became reportable from 25 June 2018 to 30 June 2020 (the so-called ‘historical’ arrangements) from 31 August 2020 to 30 November 2020.

Finally, the date for the first exchange of information on reportable cross-border arrangements moves from 31 October 2020 to 31 January 2021.

ICAEW welcomed the announcement of the delay to DAC 6, which follows significant representations from financial and professional bodies for such a deferral and further transitional measures.

The professional body stated: ‘ICAEW welcomes this measure as feedback from members has indicated that the compliance burden on businesses to comply with these rules is onerous and many aspects are still not clear.

‘While a three-month deferral is welcome, it may not be sufficient in the current climate to ensure that implementation runs as effectively as possible, particularly given the large back log of reports which will be required regarding “historical” transactions.’

As well as delaying DAC 6, the Commission intends to postpone new VAT e-commerce rules for six months. These rules will now apply as of 1 July 2021 instead of from 1 January 2021.

The Commission says the choice of different deferral periods reflects the fact that while the exchange of information under the DACs relies on an existing IT system, the e-commerce package requires both adaptation of existing IT systems and the setting-up of new ones by member states.